4 tax tips to improve chance for financing
If you want to get approved for a loan for your business, you have to make sure that you know what to do tax wise to insure your chances of getting approved are better. Following these four tax tips will help improve your chance for financing, as well as help you get the best rates and terms possible:
1. Make sure your taxes were done right last year. If you do not have past statements, make sure that you have interim financial statements as well as cash flow projections for a minimum of three years. This is an absolute must because lenders need to assess the level of risk. How can a lender know your ability to repay a loan if they do not have any kind of financials to look at? This is really important for obtaining financing.
2. Have a written business plan. Banks need to know how you plan to spend their money and how you plan to pay them back. A business plan goes hand in hand with a tax return because it shows how your plan came to fruition, or where it didn't, and what you intend to change to make it happen. Create a thorough plan, if need be, hire outside help to create a plan that is sound, well thought out, and accurate for your market analysis and projections.
3. Know how to make your deductions. To have the right calculations, the tax return must be prepared correctly. For example: When somebody deducts the home office expense, the bank will add that back as income, which helps when trying to get a loan. It's important you choose which deductions to take and when to take them. Deducting too much can make it look like you earned very little, not deducting enough can look like you are being untruthful. A professional can help you make the right deductions to show the bank your financial picture accurately.
4. Use a qualified tax professional.Qualified professionals will provide business owners with the ability to understand the tax implications of running a business. They will make sure you are not missing any commonly missed deductions, that you get all of the tax credits due to you, that you have an appropriate tax strategy to meet your long term goals, and that you choose the best tax structure for your business. In addition, a tax professional will be able to help you avoid something that can be time consuming and frustrating like an IRS audit, as well as help you prepare for business financing. Unless you know what you are doing, a professional tax preparer for businesses taxes is best when seeking financing.
Taxes are an important aspect of properly running your business, mistakes on your taxes can hinder your chances at obtaining financing, and can cause problems for you down the road.Follow the above tips for a higher success rate at obtaining business financing.